Wild animals fight for mates and food because they are wild. But if you think about it for a while, humans aren’t any different: we fight for mates too; we fight for jobs; and we fight for a lot of other things.
For businesses, the story is the same. A more than great product may give you an edge against your competitors, but it is not enough. You need to take a battlefield stance if you are to win. This does not mean you must arm yourself, no! Rather, you have to create strategies that position your business to be the best in its industry.
You cannot, however, create any of these strategies without a clear understanding of who it is you are fighting. I have written this article to be your guide for analyzing and understanding your competitors.
As you will learn below, competitor analysis is not just about browsing your competitor’s website. Or peeking through their windows as they do business. So without any further ado, let’s get started:
1. Identify Your Industry
When running a small business, it’s easy to rush into pointing nearest similar businesses as your only competitors. But this approach shortens your vision, and you are bound to miss important opportunities for securing an edge against the competition. Learn to look at the bigger picture.
And to do that, start by identifying the industry you are in. Is it transportation, entertainment, or beauty?
With this, you will quickly realize that your competition is broader than you might have thought; for example, if you have a salon that focuses on waxing men and women, your competitors aren’t just other salons nearby. Makers of home waxing kits (DIY waxing kits) are also after the same people you are targeting. So are companies that make depilatory creams and shavers.
With this knowledge, you can proceed to step 2.
2. Group Competitors
Step 1 showed that the list of competitors you face is enormous. But this should not scare you. Consumers have different preferences, giving every type of a business a chance to make money.
What you need to do now is to classify your competitors based on how big of a threat they are to you. The more a competitor is close to you and the more its business model is like yours, the higher the chance that you are going to fight for a lot of things.
In our waxing salon business example, other businesses that offer the same service and operate in close vicinity are our greatest competitors. Big companies that manufacture shavers and depilatory creams are also competitors, but they are targeting a different set of customers. So we will not fight with them on many fronts.
I recommend that you divide your competitors into at least 3 groups like this:
*High threat—other nearby salons offering the same service as we.
*Moderate threat—manufactures of shavers and depilatory creams.
*Low threat—you can think of companies that discourage people from removing body hair.
In each of these 3 categories, you need to name at least 2 businesses. This will become useful in later stages. For example, in category 2 (moderate threat), you can have Veet and Gillette.
3. Assess Competitor Strengths and Weaknesses
Now that we know who we are dealing with, we need to make a list of their strengths as well as weaknesses.
This is probably the hardest part of this whole exercise. And it’s also the part that will take most of your time. Use whatever method you believe will work to assess the strengths and shortcomings of each of the businesses you have mentioned in Step 2.
Use a table like the one below:
Name of Competitor
|strength 1||weakness 1|
|strength 2||weakness 2|
|strength 3||weakness 3|
As to how you can get “intel” about your competitors, here are some ideas in mind:
*Forums (read what people are saying about your competitors).
*Competitor’s previous customers, etc.
Try to be objective while you conduct this exercise. Prejudices can easily get in the way and affect your assessment.
4. Assess Your Strengths and Weaknesses
Now it’s your turn to go under the microscope; list your strengths and your weaknesses. Again, objectivity is crucial here (many tend to see themselves in good a light).
Here are some ways on how you can get data about your qualities:
*Your own ideas on what you think about your service or product.
*Comments people have said about your business on your website, social media, or in person.
*What suppliers say about your business.
*What competitors say about your business.
When done with the above steps, use the data you have just gathered. Compare your strengths and weaknesses against those of all your competitors. You will probably fare well in some respects and fall short in others. Create strategies that capitalize on the things you are good at. And at the same time, find ways to improve your weaknesses; otherwise, you will fail to achieve your business goals.
I’m sure you found this article helpful. If you have any questions, please let me know in the comments and I will happily answer them.